Up from Here? Panel discussion on 'The Impediments to Recovery' with K. Arrow, R. Gordon, E. Laursen and Y. Varoufakis

On 4th January 2013, in the context of the ASSA-AEA Annual Conference, EPS (Economists for Peace and Security) organised a panel to discuss the ‘Global Crisis and the Impediments to Recovery’. The organisers afforded me the distinct honour of sharing a platform, to discuss our world’s most pressing issues, with Kenneth Arrow and Robert Gordon. Below you can hear audio recordings of the discussion, in the order in which we presented our talks, plus a 30 minute panel discussion at the end. Click on for the audios plus a written summary of my argument/presentation.


  • J. Galbraith (Chair): Introduction 6:23
  • Kenneth Arrow 20:50
  • Robert Gordon 24:51
  • Eric Laursen 19:39
  • Yanis Varoufakis 15:41
  • Panel Discussion 30:46 [Guide to impatient listeners: For the first 6:32 minutes Robert Gordon is commenting critically on Eric Laursen vis-a-vis US social security issues. Then, from 6:32 to 11:12 Eric replies. At that point James Galbraith makes a brief intervention on social security (11:12 to 12:39). A member of the audience asks a question about stimulus and sustainable debt (12:39 to 15:40), followed by a reply from Robert Gordon (15:40 to 17:06); a brief comment by James Galbraith (17:06 to 17:24); a related comment by Yanis Varoufakis (17:24 to 20:34) – to whom Robert Gordon responded (20:34 to 21.35). Another question from the audience, a Forbes Magazine journalist (21:35 to 23:16), occasioned a comparison between Canada and the USA by panelists:  Robert Gordon (23:16 to 24:56), James Galbraith (23:16 to 26:00), Eric Laursen (26:00 to 26:57), Yanis Varoufakis (26:57 to 27:35).]

Yanis Varoufakis’ talking points:

What are the impediments to global recovery?

  1. A glut of savings too scared to be invested in productive activity. Global Savings ratio has climbed from 20% to 25%, and soon will exceed 27%. Angst-ridden saving spree in the East joined by hefty de-leveraging in the West. This is as much of an excess-savings crisis as it is a debt and banking crisis.
  2. The gap between deposits and loans has just exceeded $2 trillion in the US. They accumulate in banks which find it much more profitable to use them as fodder for repo trades that allow them fabulous returns under circumstances created by QE.
  3. Labour’s share of national income dropping even faster during the Recession than it did before 2008 – globally! Technical change is working like an ants colony in the foundations eating away at the economy’s capacity to produce the effective demand that will keep its factories going. It is clear that global demand is sufferring – an effective demand loss for manufactured goods of more than $1 trillion. 
  4. There are two ways in which a Great Recession can be reversed: One is for Central Banks to re-inflate bubbles of the sort that caused the problem (which, in effect, is what the Fed is striving for). The other is to plan, at the G20 level, a coordinated spending program that aims at the growth of things that humanity needs and a recession in the sectors we do not want. [I say G20 because, as we know, and as the Chinese know, spending programs must be coordinated in order to stand a chance of working – both politically and economically.]
  5. Seems that the Central Bankers have opted for bubble-reflation possibly in recognition that the G20 will not act to coordinate spending. Hence, US, UK, Japanese, Swiss and Scandinavian CBs are flooding the world with liquidity that is sipping into the global monetary system, causing rapid toxic capital movements. China too, in its struggle against the feared landing, has upped credit since 2008 by an amount equal to what the whole of the US banking system is creating in one year.
  6. This combination of
    • monetary priming,
    • continued financial sector gaming of the deposits-loans gap (e.g. JP Morgan $1116 billion deposits and only $693 loans),
    • increasing monopoly power due to Recession-induced bankruptcies and mergers,
    • technological change that, due to oligopolistic market failures, depletes the stock of good jobs and fails to deliver goods society needs,
    • a Eurozone that is constantly fine-tuning a never-ending recession, and
    •  the inability of the US economy to use its deficits in order to create suffucient effective demand both at home and globally,

will lead to

  • a recovery of asset prices in parts of the West that remain in control of their currencies (e.g. UK, US, Scandinavia),
  • massive anxieties in the East and the Brics,
  • a Depression in the European Periphery that drags the surplus economies down into a slow burning recession, and
  • a postmodern version of protectionism, e.g. the notion that the US can recoil behind a weak dollar and shale gas self-sufficiency.

What should we do?

  1. End the banks’ incentives to profit from the deposit-loans gap.
  2. A coordinated program for private debt reduction (a QE for the masses as my friend and colleague Steve Keen puts it).
  3. Coordinated spending programs at G20 level – toward a Global Manhattan Project for Green Energy.
  4. Working toward labour intensive health and education sectors.
  5. Establish a WTO-like framework for recycling surpluses at a planetary scale

(*) As these talks were amateurishly recorded by yours truly, using my phone, the quality varies and, due to proximity to my person, my talk sounds better than the rest. Apologies!